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I have gone on record that the most dangerous organization is the now French led IMF with Christine Lagarde at the helm, which has presented a concept report that debt cuts for over-indebted states are uncompromising and are to be performed more effectively in the future by defaulting on retirement accounts held in life insurance, mutual funds and other types of pension schemes, or arbitrarily extending debt perpetually so you cannot redeem. Yes you read correctly, The new IMF paper is described in great detail exactly how to now allow the private sector, which has invested in government bonds, to be expropriated to pay for the national debts of the socialist governments.

I have been warning that there is an idea that has been running around behind the curtain that the national debt of the USA could be settled by usurping all pension funds in the country. Here is a remarkable blueprint that throws all previous considerations concerning the purchase of government bonds over the cliff. The IMF working paper from December 2013 states boldly:

“The distinction between external debt and domestic debt can be quite important. Domestic debt issued in domestic currency typically offers a far wider range of partial default options than does foreign currency–denominated external debt. Financial repression has already been mentioned; governments can stuff debt into local pension funds and insurance companies, forcing them through regulation to accept far lower rates of return than they might otherwise demand.”

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Already in October 2013, the International Monetary Fund (IMF), suggested the Euro Crisis should be handled by raising taxes. The IMF lobbied for a property tax in Europe that should be imposed where there are no such taxes. The IMF has advocated for a general “debt tax” in the amount of 10 percent for each household in the Eurozone, which also has only modest savings.

People are blind. They think this is authorization to go get the rich. They are going after everyone for the “rich” are tiny players in the game. People do not want to hear that. They want to think the rich can pay the bills for everyone else. That is not practical and even Julius Caesar recognized that they may be a small group, but they are the engine of the economy that creates jobs. It would have been popular for him to wipe out all the rich who he was against. But in the end, he had to solve the debt crisis by simply retroactively attribute all interest to capital in order to solve the debt crisis that led to the first civil war.

There is no discussion whatsoever of reforming the system. They are merely planning to default on savers expropriating their savings, but continue to borrow forever. Nobody is even bothering to look at the structure that simply cannot work.

The money people have saved the IMF maintains should be used for debt service by sheer force. To reduce the enormous national debt, they maintain that government has the right to directly usurp the savings of citizens. Whether saving money, securities or real estate, about ten percent could be expropriated. This is the IMF view.

Because the government debt of the euro countries has increased a total of well over 90 percent of gross domestic product, they suggest that the people should sacrifice their savings for the benefit of the state. Socialism is no longer to help the poor against the rich, but to help the government against the people. The definition has changed.

In January 2014, the Bundesbank joined the IMF project focusing on a “wealth tax”. In its monthly report they had announced: “In the exceptional situation of an imminent state bankruptcy a one-time capital levy could but cheaper cut than the then still relevant options” if higher taxes or drastic limitations of government spending did not meet or could not be implemented.

In the latest June 2014 working paper of the IMF, they have set forth yet another scheme – extending maturity. So you bought a 2 year note? Well, the IMF possible solution would be to simply extend the maturity. Your 2 year note now become 20 year bond. They do not default, you just can never redeem.

Possible remedy. The preliminary ideas in this paper would introduce greater flexibility into the 2002 framework by providing the Fund with a broader range of potential policy responses in the context of sovereign debt distress, while addressing the concerns that motivated the 2002 framework. Specifically, in circumstances where a member has lost market access and debt is considered sustainable, but not with high probability, the Fund would be able to provide exceptional access on the basis of a debt operation that

involves an extension of maturities (normally without any reduction of principal or interest). Such a “reprofiling” operation, coupled with the implementation of a credible adjustment program, would be designed to improve the prospect of securing sustainability and regaining market access, without having to meet the criterion of restoring debt sustainability with high probability.

(THE FUND’S LENDING FRAMEWORK AND SOVEREIGN June 2014)

Now the June 2014 report has a new, far-reaching proposal. This shows how lawyers think in technical definitions of words. There is no actual default if they extend the maturity. You could buy 30-day paper in the middle of a crisis and suddenly find under the IMF that 30 day note is converted to 30 year bond at the same rate.

The huge national debts could be reduced also according to the IMF by just expropriating all private pension funds. The vast amount of people are watching TV shows, sports, or something other than government and they know that. The press will not report the real risk for that is boring news. Hence, where his occupational pensions exist, you can suddenly wake up and find your future is now applied as a contribution to government – thank you for your patriotism. They have successfully convinced the evil is the rich so pay attention to them and you will miss the political hand in your back pocket.

What investor can really judge what is hidden in his fund when the government is denying democratic processes and control the press?

One thing is certain: For years, all pension funds bought government bonds because they were “conservative” and “safe”. I have been warning that the threat would be the Sovereign Debt Crisis. The idea of a pension fund is really now seriously an outdated assumption that government bonds are extremely safe. And you want to even think that the stock markets are over priced and will crash? Where will money go? Government bonds again?

The IMF is an unelected dictatorship over people’s lives and it is now calling the “New profile” of the strategy for public debt must be reassessed. The paper is nothing more than an orderly liquidation of government debt – at the expense of bondholders who can be forced pensioners without their knowledge. The focus is on countries that either have no access to the financial market, or “whose debt is considered sustainable, but not with a high probability.”

The Eurozone is trying to federalize because they know what is coming. The IMF is telling them the path of options ahead but all are designed to sustain the power-base, not what is good for the people. The Euro-leaders have now given up and decided to make more debt while maintaining lip-service to savings. Thus, the Eurozone is likely to soon be directly affected by the IMF plans for when the market get wind of this on the horizon, it will be too late. For you see, pension funds do not THINK out of the box. Nobody will be the first to sell-out government bonds entirely. What if they are wrong and nothing happens? Then the manager loses their job. Even if they find themselves trapped by government either extending their maturities or expropriating all their assets, they will justify themselves as everybody else lost so they did nothing wrong.

Obviously, these ideas from the IMF would mean that if the debt is no longer manageable, then the power of government entitles them to just usurp everything to maintain the power-base. The plan of the IMF I believe will result in widespread civil unrest AFTER the fact. The mere fact that these proposals target investors in government bonds who must adjust to debt forgiveness or negative interest rates shows this is all about sustaining government power. Recently, the IMF has argued the ECB must purchase government bonds in the euro countries to sustain the Eurozone. They are like the terrorist leaders who brainwash kids to blow themselves up for the good of the cause while they would never do the same thing themselves.

It is noteworthy that the IMF imagines this haircut on private creditors as a kind of condition that bankrupt states must do to get any further loans from official creditors. Do as we direct of else. This is what the IMF is doing to Ukraine, no less what they did to Cyprus.

However, unlike private corporate debt where there are the real balances and tangible assets secured by real products and business, the IMF proposal amounts to a global nationalization of public finances, which are unsecured debt. This distinction is important. You get nothing from defaults in government debt but a portion of what remains in private debt. Because the states with the this infinite loop of perpetual borrowing with no intent on paying anything back, we are captured in a world of financing that has become completely corrupted.

The debt load of governments on a global basis is so oppressive, we are rapidly approaching not just the collapse in Democracy, but the collapse or the elimination of all market mechanisms in the public finance. If they cannot sustain the debt, default and FORCE the so many unsuspecting pensioners to surrender their future to allow politicians to live comfortably. They see no problem with people holding government debt should be punishable with massive losses, and are blame for extorting government even demanding interest.

The IMF proposal comes during the World Cup knowing that the press will not cover it much and the average person cares more about who wins what than the sneak attack upon their own lives. This far-reaching plan for the expropriation of savers, investors and retirees clearly shows the reality of socialism.

It was precisely 6 months ago, on January 3, when JPM, blissfully unaware of the powerful snowstorms that were raging outside its office, a condition which would later be branded with the technical economic term "harsh weather", predicted that the US economy would grow by 2.5% in the first half and 3.0% in the second, leading to a solid 2.8% annualized growth for 2014, a growth rate which would mean the US economy would grow at the fastest pace since 2005.

Fast forward exactly six months later, when on July 3, "harsh weather" firmly in the rear view mirror (but blissfully unaware of the record drought slamming California, the monsoons about to crush India, and El Nino set to ravage the US in the fall, not to mention two regional civil wars, a China whose housing bubble has popped and whose rehypothecation scandal means Chinese GDP is about to fall off a cliff, and global trade generally grinding to a halt), JPM has just followed with a revised GDP forecast. Its latest (and certainly not least) prophecy for the full year GDP: precisely one half of what it expected 6 months ago, or just 1.4%, following a cut to Q2 GDP to 2.5% from 3.0% (which means negative growth for the entire first half, something in a less insane world would be called a recession), while keeping Q3 and Q4 GDP miraculously at 3.0% for both quarters.

From JPM:

GDP growth and job growth go their separate ways: The contrast between weak GDP growth and strong job growth in 1H14 only intensified this week. Real GDP growth in 1Q14 was -2.9% saar, and we are reducing our forecast for 2Q14 to 2.5% (from 3.0%). Real GDP appears to have contracted in the first half. At the same time, payroll employment averaged 231,000 in 1H14, the strongest six-month run of job growth in the expansion to date. The obvious result is a sharp decline in productivity in 1H14 and a surge in 1H14 unit labor cost estimated at about 5% saar.

In other words, instead of above-trend, "escape velocity" GDP, the highest in nearly a decade, in 2014 US GDP is now poised to grow just 1.4% - the lowest annual growth rate since the Lehman crash.

What a difference a snow storm makes!

VW Should Keep Truckin' Alone

Paccar May Fit With Volkswagen's Ambitions But This Isn't the Right Time for a Deal

You have to wonder about your arch-rival's motives when he starts playing deal maker on your behalf.

The chief executive of Daimler's DAI.XE -0.06% trucks business told a gathering of analysts this week that "serious, multiple sources" had suggested rival Volkswagen VOW3.XE -0.13% was interested in buying Paccar. PCAR +5.44% VW quickly denied interest in the $24 billion market capitalization U.S. truck maker, which makes the Kenworth and DAF brands.

Buying Paccar would fit with VW's undoubted global ambitions in trucks. But shareholders must hope that the German company keeps a cool head when considering such heavy-duty deals.

VW has big plans when it comes to trucks. It has taken control of Germany's MAN and more recently the Swedish truck maker Scania to build a business that made more than 200,000 trucks last year. Buying premium truck maker Paccar would add another 137,000 in unit sales, further narrowing the gap with Daimler's larger volumes. It would also give VW's Europe-weighted trucks business exposure to the U.S. and Canadian heavy trucks market where Paccar has a 28% share.

Funding the deal also looks a stretch for VW. It has historically raised equity to do deals rather than dig into its cash pile, which it claims it needs to protect its all-important credit rating. But VW just asked preference shareholders for €2 billion ($2.7 billion) in fresh equity and sold a €3 billion hybrid bond to fund its buyout of minority investors in Scania.

It would need to tap preference shareholders again for Paccar. In theory, VW could raise up to €18 billion in new preference shares at the current share price, according to ISI Group. But it can't issue more ordinary shares unless the state of Lower Saxony, which can't be diluted below 20%, pitches in.

Whatever its rivals say, now doesn't look the time for VW to back up the truck for a big deal.

British jihadi: I won't return to UK until black flag flies over Buckingham Palace

Jihadist says he doesn't want to come back to what he has left behind in Britain because it is 'just pure evil', says Abu Osama who is fighting with jihadists in Syria

A British man who claims he is fighting with jihadists in Syria has said he would not return to the UK until "the black flag of Islam" flies over Buckingham Palace and Downing Street.

The man, who called himself Abu Osama, said he had received military training, including how to build bombs and shoot weapons, during his time in Syria.

Speaking with a West Yorkshire accent in an interview with BBC Radio 5 Live, he described the 7/7 London bombers as “heroic lions”, claiming "there is nothing in Britain - it is just pure evil".

Osama said he was fighting with the extremist Al-Nusra Front, linked to Al-Qaeda. However the BBC said his claims had not been “officially verified”.

The man told presenter Nicky Campbell: "I have no intention of coming back to Britain, because I have come to revive the Islamic Khilafah [the Arabic term for the creation of a caliphate].

"If and when I come back to Britain it will be when this Khilafah - this Islamic state - comes to conquer Britain and I come to raise the black flag of Islam over Downing Street, over Buckingham Palace, over Tower Bridge and over Big Ben."

His comments come after more than 100 imams, from different parts of the faith, urged British Muslims not to go to Syria or Iraq, and to offer assistance from the UK.

In the letter, the imams wrote: “Ramadan, the month of mercy, teaches us the value of unity and perseverance and we urge the British Muslim communities to continue the generous and tireless efforts to support all of those affected by the crisis in Syria and unfolding events in Iraq, but to do so from the UK in a safe and responsible way.”

One of the signatories of the letter, Imam Qari Muhammad Asim, told BBC Radio 4's Today programme more than 100 imams across Britain would urge members of their congregation not to go to Syria in Friday prayers.

He condemned the comments made by Osama and said the man had been “completely hijacked”.

The imam at Makkah Mosque said: “Radicalisation doesn’t take place overnight – Islam has been hijacked. Social media and the internet plays a huge part in radicalisation and brainwashing.”

But he added a lot of work had to be done and it was not only the responsibility of the Muslim community and imams, but law enforcement as well.

The man speaking to the BBC said his family initially found it hard to accept his decision “because no mother wants to lose her son” but his family now “understands that this is a good cause I am in”.

He added: “"They are a bit scared but I tell them we will meet in the afterlife. This is just a temporary separation.

"They said, 'We understand now what you are doing', and my mother said, 'I have sold you to Allah. I don't want to see you again in this world'."

FiveT Capital Holdings, Large Shareholder in Company, Pared its Stake

American Apparel Inc. APP +4.82% is unlikely to meet lender Lion Capital's demand to repay a $10 million loan by Friday, a person familiar with the matter said, deepening a standoff among the fashion chain and a number of its big investors.

The terms of the loan gave Lion Capital the right to call it in if the company changed its leadership, a provision that was triggered by the board's move last month to remove founder Dov Charney as chairman and CEO.

The situation is fluid, and the companies' positions could change. If American Apparel doesn't pay, Lion Capital would have to decide whether to formally accelerate the loan, a legal matter which could force the company to pay, another person familiar with the matter said. A default on the Lion loan could trigger a cross-default on a $50 million credit line extended by Capital One.

American Apparel has said it has the money to repay the Lion loan, but is withholding payment while it completes the terms, including exactly how much is owed, a person familiar with the situation said.

The moves highlight the tricky position the maker of T-shirts and leggings finds itself in after moving to fire its chief executive over allegations of misconduct.

At the center of the negotiations about the company's future is Standard General, an investment firm that effectively controls more than 40% of American Apparel's outstanding stock through an arrangement it struck with Mr. Charney. Standard General has told its investors that it wants to add new directors to American Apparel's board who have a strong background in retailing and install a new management team, according to a copy of a letter that was reviewed by The Wall Street Journal.

In the letter sent to investors, Standard General said it is unclear what role, if any, Mr. Charney will play at the company until the results of an investigation into his conduct being conducted by FTI Consulting are known. American Apparel's board alleges Mr. Charney misused company funds and failed to stop the publication of nude photos of a former employee who had sued him for sexual harassment, among other allegations.

Mr. Charney's lawyer has called the company's allegations baseless and has filed an arbitration petition to block his dismissal.

Bondholders are watching the situation closely to see whether the company will have the cash to meet interest payments that come due in October.

FiveT Capital Holdings, a large American Apparel shareholder, pared its stake to 3.2% from 12% on June 24, according to a regulatory filing.

"There is a lot of confusion around what will happen now," said Johannes Minho Roth, FiveT's founding partner. "If we see the company is moving in the right direction, we would have no problem building up our stake again."

American Apparel has hired bankers at Peter J. Solomon to explore possible financing options.

The tragedy of the Arabs

A civilisation that used to lead the world is in ruins—and only the locals can rebuild it

A THOUSAND years ago, the great cities of Baghdad, Damascus and Cairo took turns to race ahead of the Western world. Islam and innovation were twins. The various Arab caliphates were dynamic superpowers—beacons of learning, tolerance and trade. Yet today the Arabs are in a wretched state. Even as Asia, Latin America and Africa advance, the Middle East is held back by despotism and convulsed by war.

Hopes soared three years ago, when a wave of unrest across the region led to the overthrow of four dictators—in Tunisia, Egypt, Libya and Yemen—and to a clamour for change elsewhere, notably in Syria. But the Arab spring’s fruit has rotted into renewed autocracy and war. Both engender misery and fanaticism that today threaten the wider world.

The blame game

One problem is that the Arab countries’ troubles run so wide. Indeed, Syria and Iraq can nowadays barely be called countries at all. This week a brutal band of jihadists declared their boundaries void, heralding instead a new Islamic caliphate to embrace Iraq and Greater Syria (including Israel-Palestine, Lebanon, Jordan and bits of Turkey) and—in due course—the whole world. Its leaders seek to kill non-Muslims not just in the Middle East but also in the streets of New York, London and Paris. Egypt is back under military rule. Libya, following the violent demise of Muammar Qaddafi, is at the mercy of unruly militias. Yemen is beset by insurrection, infighting and al-Qaeda. Palestine is still far from true statehood and peace: the murders of three young Israelis and ensuing reprisals threaten to set off yet another cycle of violence (see article). Even countries such as Saudi Arabia and Algeria, whose regimes are cushioned by wealth from oil and gas and propped up by an iron-fisted apparatus of state security, are more fragile than they look. Only Tunisia, which opened the Arabs’ bid for freedom three years ago, has the makings of a real democracy.

Islam, or at least modern reinterpretations of it, is at the core of some of the Arabs’ deep troubles. The faith’s claim, promoted by many of its leading lights, to combine spiritual and earthly authority, with no separation of mosque and state, has stunted the development of independent political institutions. A militant minority of Muslims are caught up in a search for legitimacy through ever more fanatical interpretations of the Koran. Other Muslims, threatened by militia violence and civil war, have sought refuge in their sect. In Iraq and Syria plenty of Shias and Sunnis used to marry each other; too often today they resort to maiming each other. And this violent perversion of Islam has spread to places as distant as northern Nigeria and northern England.

But religious extremism is a conduit for misery, not its fundamental cause (see article). While Islamic democracies elsewhere (such as Indonesia—see article) are doing fine, in the Arab world the very fabric of the state is weak. Few Arab countries have been nations for long. The dead hand of the Turks’ declining Ottoman empire was followed after the first world war by the humiliation of British and French rule. In much of the Arab world the colonial powers continued to control or influence events until the 1960s. Arab countries have not yet succeeded in fostering the institutional prerequisites of democracy—the give-and-take of parliamentary discourse, protection for minorities, the emancipation of women, a free press, independent courts and universities and trade unions.

The absence of a liberal state has been matched by the absence of a liberal economy. After independence, the prevailing orthodoxy was central planning, often Soviet-inspired. Anti-market, anti-trade, pro-subsidy and pro-regulation, Arab governments strangled their economies. The state pulled the levers of economic power—especially where oil was involved. Where the constraints of post-colonial socialism were lifted, capitalism of the crony, rent-seeking kind took hold, as it did in the later years of Egypt’s Hosni Mubarak. Privatisation was for pals of the government. Virtually no markets were free, barely any world-class companies developed, and clever Arabs who wanted to excel in business or scholarship had to go to America or Europe to do so.

Economic stagnation bred dissatisfaction. Monarchs and presidents-for-life defended themselves with secret police and goons. The mosque became a source of public services and one of the few places where people could gather and hear speeches. Islam was radicalised and the angry men who loathed their rulers came to hate the Western states that backed them. Meanwhile a vast number of the young grew restless because of unemployment. Thanks to the electronic media, they were increasingly aware that the prospects of their cohort outside the Middle East were far more hopeful. The wonder is not that they took to the streets in the Arab spring, but that they did not do so sooner.

A lot of ruin

These wrongs cannot easily or rapidly be put right. Outsiders, who have often been drawn to the region as invaders and occupiers, cannot simply stamp out the jihadist cause or impose prosperity and democracy. That much, at least, should be clear after the disastrous invasion and occupation of Iraq in 2003. Military support—the supply of drones and of a small number of special forces—may help keep the jihadists in Iraq at bay. That help may have to be on permanent call. Even if the new caliphate is unlikely to become a recognisable state, it could for many years produce jihadists able to export terrorism.

But only the Arabs can reverse their civilisational decline, and right now there is little hope of that happening. The extremists offer none. The mantra of the monarchs and the military men is “stability”. In a time of chaos, its appeal is understandable, but repression and stagnation are not the solution. They did not work before; indeed they were at the root of the problem. Even if the Arab awakening is over for the moment, the powerful forces that gave rise to it are still present. The social media which stirred up a revolution in attitudes cannot be uninvented. The men in their palaces and their Western backers need to understand that stability requires reform.

Is that a vain hope? Today the outlook is bloody. But ultimately fanatics devour themselves. Meanwhile, wherever possible, the moderate, secular Sunnis who comprise the majority of Arab Muslims need to make their voices heard. And when their moment comes, they need to cast their minds back to the values that once made the Arab world great. Education underpinned its primacy in medicine, mathematics, architecture and astronomy. Trade paid for its fabulous metropolises and their spices and silks. And, at its best, the Arab world was a cosmopolitan haven for Jews, Christians and Muslims of many sects, where tolerance fostered creativity and invention.

Pluralism, education, open markets: these were once Arab values and they could be so again. Today, as Sunnis and Shias tear out each others’ throats in Iraq and Syria and a former general settles onto his new throne in Egypt, they are tragically distant prospects. But for a people for whom so much has gone so wrong, such values still make up a vision of a better future.